English 
搜索
Hebei Lansheng Biotech Co., Ltd. ShangHai Yuelian Biotech Co., Ltd.

Agricultural inputs: trading down in Indiaqrcode

Sep. 1, 2015

Favorites Print
Forward
Sep. 1, 2015
Growing pressure on farm incomes and the threat of another deficient monsoon season are pushing users to buy cheaper agricultural inputs.
 
A report by Investec Securities says Indian farmers are choosing least cost options, based on channel checks, even while ignoring the potential hazard of using lower cost products. “Anecdotal evidence also points to several instances of trading down to relatively low value and potentially hazardous generic molecules due to pressure on farmers’ profitability over the last two seasons,” says the research note.
 
The findings corroborate management commentary during the June-quarter earnings season. Agrochemical firms Rallis India Ltd and Dhanuka Agritech Ltd have pointed to down-trading by farmers. “Because of a declining trend in the market, prices of most of the products were reducing,” M.K. Dhanuka, managing director of Dhanuka Agritech Ltd said that.
 
Many believed that the pricing pressures were confined to certain generic agrochemical products, or to regions facing dry weather markets, and due to a reduction in raw material costs.
 
But that does not seem to be the case. Even prices of branded products are being cut and the malaise is spreading to other agriculture inputs, too—such as fertilizers and seeds. “There was a change in consumption pattern of complex fertilizers away from DAP towards relatively cheaper products (less Phosphorus content) like 20:20:0:13, 10:26:26, etc.,” Investec adds. DAP is diammonium phosphate.
 
Perhaps the impact is already being felt by seed companies. Kaveri Seed Co. Ltd, one of the biggest sellers of cotton seeds in India, has seen its sales slump 20% in the June quarter. The scenario is a bit different in the seed market. Demand for cotton seeds has fallen due to unattractive cotton prices and shift in acreages to other crops. That intensified competition and weighed on prices.
 
But poor sentiments and tight cost controls at the farmers’ end mean the price cuts found limited takers. Instead, the situation bred a grey market, where prices were substantially lower. “Farmers were looking to cut costs, which resulted into higher grey market sales this year. As per our interaction with government officials, grey market sales stood at 50% of total (cotton) seed sales vs 20% average for earlier years,” Investec adds.
 
The concerns are weighing on share prices. Kaveri Seed Co. halved from 23 April, when the India Meteorological Department gave the first monsoon forecast.
 
Coromandel International and Dhanuka Agritech have lost in the range of 20-26%, while Rallis India is down 4%.
 
The companies are taking mitigation measures. They are increasing their reach and stepping up marketing efforts. While the effectiveness of these measures will be known in the second and third quarter results, the emerging monsoon situation and trends on the ground point to a challenging environment.


 
Source: livemint.com

0/1200

More from AgroNewsChange

Hot Topic More

Subscribe Comment

Subscribe 

Subscribe Email: *
Name:
Mobile Number:  

Comment  

0/1200

 

NEWSLETTER

Subscribe AgroNews Daily Alert to send news related to your mailbox